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Climate change and the role of markets and trade: Leveraging co-benefits

By Christopher Neglia

A high level side event brought together three international trade institutions- UNCTAD, WTO and ITC- and their United Nations partners today on the sidelines of COP21. Trade has an important role to play in accelerating the development of markets and diffusing low carbon technologies. At the same time, climate policies do influence trade among countries by promoting more sustainable emission patterns. Although trade is not a headline topic at COP21, it is certainly on the agenda in the UNFCCC Subsidiary Body for Implementation, which works on cross cutting issues. The international trade institutions have contributed to and benefited from this work.

Arancha Gonzalez, Executive Director of ICT asserted that at the interface of trade and climate change, we should not only look at big business, but also at small and medium size enterprises, which represent the majority of economic agents in all countries. The main thrust of her organization's work on climate change is in response to three main questions: 1) how can trade organizations support the mitigation efforts of small enterprise? How can trade be used to create new opportunities that are climate sensitive? 3) how can multilateral cooperation support public policies and development objectives?

Joakim Reiter, Deputy Secretary-General of UNCTAD recognized the role of habitats in determining the products that people produce and trade. But due to climate change he noted many habitats are undergoing dramatic changes. For instance, in Mesoamerica where higher temperatures are creating conditions whereby fungi and disease are destroying Arabica coffee plants. Moreover, fishing stocks are collapsing everywhere due to overfishing and ocean acidification. According to Reiter, trade policy makers must stop doing the wrong things by ending trade distortions in the form of subsidies that prop up wasteful and destructive economic activities. And we must put a premium on doing the right things, by extending carbon markets and supporting product certification standards.

Tim Groser, Minister of Trade and Climate Change in New Zealand spoke in favour of a radical reform to fossil fuel subsidies, which have no place in a sustainable economy, he said. This is a critical point at COP21 more broadly, since the IEA estimates eliminating all such subsidies would achieve a further ten per cent reduction in global carbon emissions by 2030. Let that sink in for a moment. Fortunately, some countries are moving further down this track, with Indonesia, Nigeria and United Arab Emirates all pledging to dramatically reduce their own fuel subsidies.

Margarita Astralaga, Director of the Environment and Climate Division in IFAD noted that agriculture, deforestation and land use together represent about twenty five per cent of global carbon emissions. Agriculture is therefore part of the problem and solution to climate change. With better soil and water management, supported by international climate and sustainable development agendas, smallholder farmers in particular (since there are simply so many of them) can make a significant contribution to mitigation efforts. Furthermore, smallholders have the potential to take advantage to a greater extent in nascent value chains. Studies done by the Economics of Ecosystems and Biodiversity (TEEB) suggest that the market for certified organic agriculture is expected to rise from US$ forty billion in 2008 to two hundred and ten billion by 2020. We expect that the private sector will come and partner with small producers around the world to access markets at fair prices, Astralaga added.